NOTICE TO TERMINATE FARM LEASE MUST BE TIMELY AND IN WRITING
I grew up on a farm near Darlington and my Dad was a farmer for most of his adult life. My Dad and his farming partner operated on a partnership handshake for nearly 20 years and never had a major business dispute arise between them during that partnership. A verbal agreement and handshake was good enough to get the job done.
While we all long for the days when we could operate on a handshake and verbal agreement, those days probably never really existed. There were lawsuits and disagreements that ended up in court even back in the “good old days.” Sound business practice dictates that you put agreements into writing and that when giving notice to another party you do it in writing in a timely fashion. A recent Indiana Court of Appeals case illustrates this point as it relates to farm leases.
The Indiana Court of Appeals recently addressed the issue of what type of notice is required to terminate a year to year tenancy for farm ground. Guardianship of Gardner vs. Prochno, 2012 WL 823814 (Ind. Ct. App. 2012). The relevant facts in this case were that Prochno rented 480 acres of farm ground in Marshall County, Indiana, from Gardner on a year to year farm lease. The trial court found that the custom and practice in Marshall County was for a year to year farm lease to commence on March 1 of each year. On April 11, 2010, Prochno received a notice to terminate tenancy from Gardner’s guardian for 240 of the 480 acres “at the expiration of the current year of 2010”. In December of 2010, Prochno’s attorney sent a letter to the Guardianship clarifying that Prochno intended to farm the real estate owned by Gardner which was not referenced in the notice to terminate tenancy. The tenancy was terminated on the 240 acre parcels referenced in the notice, but Gardner also owned an additional 240 acres for which no notice was given. Prochno intended to farm that acreage. In January 2011, the Guardianship sent Prochno an amended notice to terminate the tenancy for the 240 acres that had been omitted from the original notice to terminate. Prochno then filed a complaint for declaratory judgment asking the trial court to declare that there was an enforceable contract for Prochno to farm the 240 acres of farm land in 2011 which had been omitted from the original termination notice. The trial court ruled in favor of Prochno citing I.C. § 32-31-1-1 that notice of termination must be given to a tenant not less than three months before expiration of the year and that the Guardianship had failed to give written notice on terminating the 240 acres. Thus, the notice in January of 2011 was untimely as to the 2011 growing season on the omitted 240 acres and Prochno was entitled to farm that ground. The Guardianship appealed the trial court’s decision. The Court of Appeals upheld the trial court ruling.
The bottom line on the decision issued by the Indiana Court of Appeals is that under I.C. § 32-31-1-1 et seq., 3 months written notice is required to terminate a year to year tenancy on a farm lease. The purpose of such notice to terminate a tenancy is to reasonably inform the tenant that the tenancy will not be renewed for an additional year and the lease will terminate at the end of its current term. The tenant and landowner should make future plans accordingly.
Here are a couple of practical pointers to keep in mind in light of the Gardner v. Prochno case. If possible, put your farm lease terms into a written agreement that has a definite termination date in the lease. If there is a termination date in the lease then you don’t have to worry about the three month statutory notice to terminate. If you have had a written farm lease that expired on its own terms and the tenant farm has held over and continued to farm the land, then you probably have a year to year tenancy and you will need to give the three months written notice to terminate the tenancy. Most of the written fixed term leases that I see for the Montgomery County area are for a calendar year. If a written calendar year lease becomes a year to year lease as a result of hold over by the tenant, then written notice to terminate must be given to the tenant farmer before October 1. Lastly, give any notices to terminate in writing and do not rely upon oral notice.
Both land owners and farmers need to be aware of what is involved in terminating a year to year tenancy. Discussion and a handshake is a good thing, but putting it in writing in a timely fashion helps to keep legal problems away.
This article is written and published for information purposes only. It is not intended nor is it to be used as a substitute for independent legal advice. Stu Weliever practices law with HENTHORN, HARRIS & WELIEVER, P.C., Crawfordsville, Indiana, and can be reached at (765) 362-4440 or at stuw@henthornlaw.com.
